U.S. shale executive warns global oil glut will not soon clear

U.S. shale producer EOG Resources Inc does not expect the current oil oversupply to ease as quickly as it did in the last downturn, a company executive told an energy conference on Tuesday.

“Long term, I don’t see the supply side reacting as significantly has it has in the past,” said Ken Boedeker, executive vice president for exploration and production.

Oil prices have fallen by more than half this year as the coronavirus pandemic cut demand and a price war erupted between Russia and Saudi Arabia. The two top producers have vowed to pump full bore to gain market share, reversing years of production curbs to prop up crude prices.

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EOG planned its 2020 spending budget assuming around $40 a barrel oil, below where crude oil was trading at the beginning of the year, but above current prices. On Tuesday, U.S. crude futures were trading at under $24 a barrel.

The shale producer earlier this month said it would cut its 2020 budget by 31% to between $4.3 billion and $4.7 billion and targeted flat year-over-year oil and gas production.

On Tuesday, oilfield service firms Schlumberger and Baker Hughes Co said they would reduce spending, joining dozens of oil and gas companies slashing budgets since prices began plunging in early March.

Spending in the upstream sector could fall by more than 25% this year, estimated energy consultancy Wood Mackenzie. Among recent expense reductions, Royal Dutch Shell Plc and Chevron Corp cut by 20% and ConocoPhillips by 10%.

Most of EOG’s activity this year will be in the Eagle Ford and Delaware shale basins, Boedeker said, adding it could reduce some plans if necessary.

EOG will continue to evaluate shale patch acquisitions, but it is not interested in expensive corporate deal-making. Boedeker saidSource: Reuters (Reporting by Liz Hampton; Editing by Lisa Shumaker)